Sales were a quarterly record $80.9 million, up 71% versus the second quarter of 2017 and up 20% sequentially versus the 2018 first quarter. The improvement was due to better-than-expected results at DynaEnergetics, DMC’s oilfield products business, which continues to benefit from increased well completion activity in North America’s unconventional oil and gas sector, and strong demand for its intrinsically safe initiating and perforating systems. Sales at NobelClad, DMC’s explosion welding business, also exceeded prior forecasts.

Second quarter gross margin was 33% versus 30% in the year-ago second quarter and 34% in the first quarter. The sequential decline resulted from higher-than-expected material costs and operational inefficiencies associated with DynaEnergetics’ capacity expansion program. DynaEnergetics is transitioning to in-house production of various components and instituting a price increase to offset the rise in material costs; and expects to achieve improved margins during the second half of 2018.

Operating income was $10.2 million versus $2.0 million in last year’s second quarter. Net income was $6.4 million, or $0.43 per diluted share, versus net income of $189,000, or $0.01 per diluted share, in the year-ago second quarter.

Excluding $217,000 in restructuring expenses at NobelClad, adjusted operating income was $10.4 million and adjusted net income was $6.6 million, or $0.45 per diluted share. Second quarter adjusted EBITDA, inclusive of approximately $1.5 million in litigation expense, was $13.9 million versus $6.0 million in last year’s second quarter and $11.6 million in this year’s first quarter.

Net debt* (lines of credit less cash and cash equivalents) at June 30, 2018, was $28.0 million versus $18.6 million at March 31, 2018, and $9.0 million at December 31, 2017. The increase primarily is attributable to borrowings to fund increased working capital and for the construction of 74,000 square feet of new manufacturing, assembly and administrative space at DynaEnergetics’ manufacturing site in Blum, Texas.

DynaEnergetics

Second quarter sales at DynaEnergetics were a record $58.9 million, up 120% versus last year’s second quarter and 20% sequentially. Gross margin was 37%, up from 34% in last year’s second quarter. Operating income was $12.2 million versus $2.0 million in the comparable year-ago quarter. Adjusted EBITDA was $13.8 million versus $4.2 million in the 2017 second quarter.

NobelClad

NobelClad reported second-quarter sales of $22.0 million, up 8% versus the 2017 second quarter and 21% sequentially. Gross margin was 23% versus 25% in last year’s second quarter. The margin decline reflects the impact of a lower-margin project mix. Operating income was $1.7 million versus operating income of $2.3 million in the year-ago quarter. Excluding restructuring charges related to NobelClad’s European consolidation program, adjusted operating income was $1.9 million. Adjusted EBITDA was $2.7 million versus $3.3 million in last year’s second quarter.

NobelClad’s trailing 12-month book-to-bill ratio at the end of the second quarter was 1.08. Order backlog improved to $37.0 million versus $35.6 million at the end of the 2018 first quarter.